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MND NewsWire features plain and simple interpretations of industry related data and events written in a manner that maintains the interest of random readers while still catering to the perspective of a housing market professional.

The initial article Appraisal
Fraud: A need to Sort out the Victims from the Perps? published on April
25 elicited the most response. The comments ranged from criticism of the appraisal
process or of appraisers themselves; indictments of real estate agents, the
National Association of Realtors and lenders; to suggestions for reforming
the system. If appraisal fraud is a subject you care about - and if you
own a home there is a good chance you should care a lot - please click on "Comments/Feedback"
in the upper left of this screen to see some of the thoughts that appraisers
and others have posted.

In the interim, a posting on a closed appraisal web forum with a passionately
involved membership resulted in a dozen or more responses. The posting asked
appraisers for concrete examples of pressure they had received to inflate appraisals
or hit specific numbers. While we did receive a few anecdotes about such pressure,
most of the correspondence was an interesting mix of finger-pointing, suggestions,
and a bit of fortune telling. We have included a representative sample of these
responses below. While each writer granted permission to quote him by name,
they are identified only by location.

"CP" from Albuquerque, New Mexico submitted a collection of emails she has
received since the first of this year from mortgage lenders and what is apparently
a clearing house that makes assignments to free-lance appraisers.

From the clearing house:

Could you take a look at these addresses and see what the square footage is
and the recent sales price/date to see if these could be used in place of (your)
comps. We would like to increase value to $192,000. (Three addresses in Albuquerque
were referenced.)

From the clearing house:

The lender is requesting that I check with you to have value increased on this
report. They are looking to see if a bump in value to $150.000 is possible.
The loan is ready to fund and the lender needs this one bad. If you need to
pull new comps that would be fine and we will happily pay you an additional
fee to take pictures or whatever is needed.

From a loan officer to the clearing house:

I need an increase to 155,000 to make this loan work. Can you contact the appraiser
and see if this is possible. (The sender included information on 4 properties
- stating he did not know anything about the square footage or other attributes
of any of them - which he wanted the appraiser to use rather than those
comps she had previously submitted.)

CP states that, on the last occasion she emailed the loan officer: "Look,
this isn't just because I got up on the conservative side of the bed this
morning (n)or am I on a power trip. These are nice people, but this is what
their home is worth. I can't change that."

CP says that, in this case the homeowners had been in their home for 28 years,
are retired, and love to travel in their RV. She says that she would never give
"a value short of their expectations unless that value was fully supported
by the market." Why in heavens name, at this time in their lives, are
they maxing out their home to mortgage it with a rather shifty, higher fee/interest
outfit???"

Several appraisers including TH from Texas claimed that pressure on appraisersdoes not typically come from banks or credit unions which do "want to
know the true value of the home. The bottom line is mortgage brokers
(who) want their loan to close and they do not want the necessary evil of an
honest appraisal. Even fairly honest mortgage brokers will use a 'special appraiser'
to get the value needed when their 'honest appraiser' will not comply with their
value needs. It is 'greed' driven, or as a mortgage broker will say, 'a business
decision.'"

GH from Carlsbad, California had an interesting solution: "Appraisals
are more closely related to the underwriting process than they are to the origination
process. Take the loan originators and everyone in the production side of the
deal out of the appraisal engagement loop, and (the cause of) 90 percent of
all misleading appraisals would be cured overnight."

Steve from California wrote a very long and thoughtful note. He and several
other correspondents felt that an earlier attempt to cure mortgage improprieties
was worse than the disease in that it has put appraisers at substantial legal
risk. The Financial Institutions Reform, Recovery and Enforcement Act
of 1989 (FIRREA) was enacted to address the savings and loan crisis.
This was a huge piece of legislation but, in the fine print, set standards for
professions engaged in the loan process, including appraisers. It was FIRREA
that instigated the various state licensing and regulatory
legislation. This, Steve said, puts appraisers in the position of certifying
they are in compliance with the Uniform Standards of Professional Practices
and "now they are an easy target as a Loss Recovery Vehicle. Appraisers have
been indicated in mortgage fraud cases and charged with things like wire
fraud, mail fraud, communications fraud,
bank fraud, unfair business practices and
unfair competition. I know of no cases in which the appraiser
was charged with appraisal fraud..." as "that would nullify their professional
liability insurance.

"The appraiser is the ultimate mortgage insurer. The problem is they
do not know it. They only find out when they start getting sued. The antics
of the loan originations departments are different than that of the loss recovery
actions of the legal department'.

So where is all of this going?

Steve said that in California "over half of the original appraisers who
were licensed 15 years ago have left the business. Now over half of the residential
appraisers are Trainees (an official designation in some states). Many residential
appraisal shops employ unlicensed people who go out and see the properties or
prepare the reports which are then signed by someone who never saw the property."

To carry appraising yet another generation into the future, TF of Southern
California is about to begin training for her appraiser's license. She
wrote the following:

"...one of my biggest concerns in entering the field...is lender pressure.
I intend to screen prospective mentors to insure whoever agrees to train me
is every bit as ethical and professional as I intend to be. This includes not
allowing clients to influence values. My research ...leads me to believe that
the pool of potential mentors...will be drastically lessened in the current
environment. I am also concerned that, once I am ready to actually do appraisals,
that there will be enough work from lenders and brokers who do not want values
pushed to allow me to complete my training in a timely manner.

It appears that the complaints of appraisers are beginning to gain significant
traction. Rumor has it that a major network is preparing a story on appraisal
inflation/fraud and the industry press has also been paying attention.

Comments

Thank you. Thank you. Now lets start hearing some responses to our problems from other real estate industry participants and regulators. We have sent a letter to the president of the National Association of Mortgage Brokers, signed by over 100 appraisers. We havent received a peep in reply to date, and this was months ago. This was months ago. I have sent correspondence to OFHEO, but received no reply either.

Edd Gillespie

on

Why dont you run a piece on mortgage fraud. Mortgage brokers usually want an appraiser who will help them commit mortgage fraud, and unfortunately they can find one. But, as in prostitution, the john is as guilty as the prostitute.
Ask your readers what they think of mortgage brokers who pressure appraisers to come up with an estimated value that will make their loan work.

arcticblueice

on

I am grateful for everyone who is making an effort to tame this feeding frenzy where fraud is so rampant. The F.B.I. has received thousands of complaints and are making an effort to educate the public. You may report real estate fraud here:
http://www.namb.org/report_fraud.htm
You may also just provide a tip to the F.B.I. at the following URL:
https://tips.fbi.gov/
Invest wisely and please report felonious behavior immediately.

Barney

on

The statement, Appraisers claim they are being pressured should be sent to pasture. Nearly all appriasers are pressured on a regular basis to commit gross fraud and the mortgage industry makes no attempts to conceal so. You may read it from the brokers @:
Ref: Brokers Outpost.com

Stephen

on

The mortgage lending business is in a state of anarchy. One need not look beyond the tip of their finger to realize that, given low barriers to entry into the field, this is the ultimate get rich quick scheme that really works.
A complete reengineering of the industry is required.

Wayne

on

I was asked by a lender to change a purchase price or increase by $ 10,000. I told the lender that must come from Selling Agent & Seller. I then would disclose this information in Sales & Listing Analysis. Then then wanted me to guarantee my appraisal for new higher amount or cancel the assignment after I had made inspection and inspected the sales comparables. Yes, inflate the amount and hit a number. They even said they had some else already guarantee the higher number over the phone.

AL B

on

Does anyone know where to report inspectors who did a shoddy, bad appraisal on a property? Thanks, Al B

Ginny

on

Does an appraiser have to come back if they want to see if you fixed a leak?

Jaime

on

To clear up the problem caused by most defective appraisals the industry need only to require the lenders to submit the address, appraisers name, license number & date of the appraisal to the local state agency. The agency can then sort by date with a subsort by appraisers license number to see if the number is being used by only the properly named appraiser and to see how many appraisals that appraiser is signing off on each day. The numbers would show up the "boiler" shops.

Doreen Campbell

on

I see fraud, pressure, and I also see ignorance. New guys were never trained in busy times, cranking out too many reports daily/weekly. South Florida's huge boom & resulting over-inflation of values left too many new mortgage, realtors & appraisers under-educated and unprepared for the swing to a much different market. A recent review showed valuation above expiring listings in the complex! What's wrong with this guy? He used obvious non-comps to support fraud... Sad that reliable appraisers are shunned

D.Cook

on

There are numerous appraisers who do not complete an inspection correctly and end up with numerous errors - including homes as comparable that are not even similar to the subject property. These appraisers need to be report to the FBI so they do not give the rest of the profession a bad wrap. The FBI website for your state will have this information.

Anonymous

on

Lenders do sometimes pressure appraisers, but as an appraiser for 35 years, I can tell you that the root of the problem is sales agents, who seem to believe that it is the appraiser's job to justify their deals and will raise hell with anyone who gets in the way. Ask any loan officer or appraiser & they will relate horror stories of dealing with these people. Any firewall legislation to immunize appraisers from pressure is doomed to failure unless it addresses abusive real estate agent behavior.

aNONYMOUS

on

Appraisers are definately pressured by relators and mortgage brokers but they CAN put a stop to it. It may mean losing some business but you have to hold your ground with the realtors and mortgage brokers. Remind them that pressuring, threatening, coercing or intimidation of any kind to any person involved in a federally related mortgage transaction is a violation of the federal RICO ACT.
They'll stop.

Alan

on

False appraisals are accepted by very willing dupes, lenders
who do so little to vet the appraisals.reviews by local "review appraisers", (not avms), would very easily uncover most of the negligence/appraisal fraud out there, but like a bank that leaves the vault open, lenders are so very "surprised" that the values are inflated and property conditions mischaracterized...what rational person or entity lends without knowing the collateral's value..mortgage lenders
do business exactly this way

Anonymous

on

The goverment and municipalities are the number one offender of bad appraisers. I just received a "notice of property value" from the City of NY and the Dept. of Finance where they increased the property value on my house once again. You would think that with the housing crisis and economy the city would lower not increase your real estate taxes. The reason why they raised the value is to increase taxes. A tactic that is very unfair and deshonest, and is done by the goverment.

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